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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI SAKTIJIT DEY & SHRI M BALAGANESH
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘C’ NEW DELHI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI M BALAGANESH, ACCOUNTANT MEMBER
ITA No. 2545/Del/2022 Assessment Year: 2017-18
M/s. Jubilant Securities Vs. DCIT, Circle-13(2), Pvt. Ltd., Plot No. 1A, Delhi Sector 16A, Noida (UP). PAN :AAACH3072J (Appellant) (Respondent)
Appellant by Shri Gaurav Jain, Adv. & Shri Sudrshan Ray, AR Assessee by Shri Anuj Garg, Sr. DR Date of hearing 08.05.2023 Date of pronouncement 18.05.2023
ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: This is an appeal by the assessee against order dated 26.08.2022
passed by the National Faceless Appeal Centre (NFAC), Delhi
confirming the penalty imposed under Section 270A of the Income-
Tax Act,1961 for an amount of Rs.77,020 for the assessment year
2017-18.
2 ITA No. 2546/Del./2022
Briefly, the facts are, assessee is a resident corporate entity. For
the assessment year under dispute, the assessee filed its return of
income on 31.10.2017 declaring income of Rs.20,05,980.
Subsequently, assessee filed a revised return of income on 28.08.2018
declaring income of Rs.18,11,980.
In course of assessment proceedings, the Assessing Officer
noticed that in the year under consideration, assessee had earned
exempt income, whereas, it has disallowed expenses to the tune of
Rs.27,250 under Section 14A of the Act. Being of the view that the
disallowance made by the assessee is on ad hoc basis and not in
accordance with Rule 8D (2), the Assessing Officer proceeded to
compute disallowance in term with the said rule and computed the
disallowance at Rs.5,25,762. After reducing the suo motu
disallowance made by assessee, he made a net disallowance of
Rs.4,98,512. The assessee accepted the disallowance without litigating
further. Be that as it may, based on the aforesaid disallowance, the
Assessing Officer initiated proceedings for imposition of penalty
under Section 270A of the Act, alleging under reporting of income by
the assessee. Ultimately, the Assessing Officer passed an order
3 ITA No. 2546/Del./2022
imposed penalty of Rs.77.020 under Section 270A of the Act. Though,
the assessee filed an appeal challenging the imposition of penalty,
however, the first appellate authority confirmed the penalty imposed.
Before us, learned counsel for the assessee submitted that in the
year under consideration, the assessee had earned exempt income by
way of dividend amounting to Rs.27,250. Therefore, the assessee
restricted the disallowance under Section 14A read with Rule 8D to
the extent of exempt income earned, by following the ratio laid down
in various decisions rendered by Hon'ble High Courts and Tribunal.
He submitted, merely because the assessee accepted the disallowance
made by the Assessing Officer, it cannot lead to the conclusion that
the assessee has under reported its income. Thus, he submitted,
penalty imposed should be deleted.
Learned Departmental Representative strongly relied upon the
observations of the Assessing Officer and learned Commissioner
(Appeals).
We have considered rival submissions and perused the material
on record.
4 ITA No. 2546/Del./2022
Undisputedly, in the year under consideration, assessee has
earned exempt income by way of dividend amounting to Rs.27,250.
As per the ratio laid down in various judicial precedents, the
disallowance under Section 14A read with Rule 8D, cannot exceed the
quantum of exempt income earned during a particular assessment
year. Following the settled legal position, the assessee had restricted
disallowance under Section 14A to the quantum of exempt income
earned during the year. Thus, in our view, there was a valid reason
available to the assessee for restricting the disallowance under Section
14A of the Act to the extent of exempt income earned. Merely because
assessee accepted the disallowance made by the Assessing Officer, it
cannot automatically lead to the conclusion that the assessee had
under reported its income. In fact, penalty under Section 270A of the
Act is not automatic. Sub-section(6) of section 270A carves out
exceptions where in certain instances the income assessed cannot be
treated as under reported income. In the facts of the present case, in
our view, assessee’s case will fall within the exception provided under
section 270A(6)(a), as, the explanation offered by the assessee with
regard to the disallowance made under Section 14A is a valid and
5 ITA No. 2546/Del./2022
reasonable explanation. Therefore, in our view, the penalty imposed
under Section 270A of the Act in the facts of the present case is
unsustainable. Accordingly, we delete the penalty imposed.
In the result, the appeal is allowed
Order pronounced in the open court on 18th May, 2023.
Sd/- Sd/- (M BALAGANESH ) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 18th May, 2023 Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi